ITAT Chennai Judgments — September 2024

The Tribunal, in its decision, addressed several grounds raised by the assessee. Regarding the issue of working capital adjustment, the Tribunal noted that this issue had been decided in the assessee's own case for AY 2013-14 (ITA No. 585/Chny/2017, dated 19.01.2024). In that decision, the Tribunal had held that while working capital adjustment impacts pricing and operating margins, it is incumbent upon the assessee to provide necessary details to prove the difference in working capital position compared to comparable companies and the required adjustment. The Tribunal had then set aside the order of the CIT(A) and directed the AO/TPO to re-examine the assessee's claim with reference to the computation and supporting evidence. Respectfully following this precedent, the ITAT set aside the order of the CIT(A) on the issue of working capital adjustment and directed the AO/TPO to re-examine the assessee's claim and decide the issue in accordance with the law. This ground was allowed for statistical purposes. Since the facts were identical for AYs 2015-16 and 2016-17, the same decision was applied mutatis mutandis. The judgment explicitly states that all the appeals of the assessee are partly allowed. The Tribunal did not expressly leave any issue undecided but focused on the working capital adjustment for the detailed reasoning provided.

The Tribunal, in its decision, addressed several grounds raised by the assessee. Regarding the issue of working capital adjustment, the Tribunal noted that this issue had been decided in the assessee's own case for AY 2013-14 (ITA No. 585/Chny/2017, dated 19.01.2024). In that decision, the Tribunal had held that while working capital adjustment impacts pricing and operating margins, it is incumbent upon the assessee to provide necessary details to prove the difference in working capital position compared to comparable companies and the required adjustment. The Tribunal had then set aside the order of the CIT(A) and directed the AO/TPO to re-examine the assessee's claim with reference to the computation and supporting evidence. Respectfully following this precedent, the ITAT set aside the order of the CIT(A) on the issue of working capital adjustment and directed the AO/TPO to re-examine the assessee's claim and decide the issue in accordance with the law. This ground was allowed for statistical purposes. Since the facts were identical for AYs 2015-16 and 2016-17, the same decision was applied mutatis mutandis. The judgment explicitly states that all the appeals of the assessee are partly allowed. The Tribunal did not expressly leave any issue undecided but focused on the working capital adjustment for the detailed reasoning provided.

The Tribunal, in its decision, addressed several grounds raised by the assessee. Regarding the issue of working capital adjustment, the Tribunal noted that this issue had been decided in the assessee's own case for AY 2013-14 (ITA No. 585/Chny/2017, dated 19.01.2024). In that decision, the Tribunal had held that while working capital adjustment impacts pricing and operating margins, it is incumbent upon the assessee to provide necessary details to prove the difference in working capital position compared to comparable companies and the required adjustment. The Tribunal had then set aside the order of the CIT(A) and directed the AO/TPO to re-examine the assessee's claim with reference to the computation and supporting evidence. Respectfully following this precedent, the ITAT set aside the order of the CIT(A) on the issue of working capital adjustment and directed the AO/TPO to re-examine the assessee's claim and decide the issue in accordance with the law. This ground was allowed for statistical purposes. Since the facts were identical for AYs 2015-16 and 2016-17, the same decision was applied mutatis mutandis. The judgment explicitly states that all the appeals of the assessee are partly allowed. The Tribunal did not expressly leave any issue undecided but focused on the working capital adjustment for the detailed reasoning provided.

The Tribunal noted the assessee's submission that the transfer pricing issues had been discussed and concluded with the Inland Revenue Authority of Singapore under the Mutual Agreement Procedure (MAP) as per Article 27 of the DTAA between India and Singapore. In light of this development and the assessee's request for withdrawal, the Tribunal decided to dismiss all three appeals as withdrawn. The operative direction was to dismiss the appeals. No issues were expressly left undecided.

The Tribunal held that the cash deposits were backed by sales recorded in the books of accounts and the assessee had provided evidence to explain the source of the cash. Therefore, the addition under Section 69A was not sustainable.

The Tribunal noted the assessee's submission that the transfer pricing issues had been discussed and concluded with the Inland Revenue Authority of Singapore under the Mutual Agreement Procedure (MAP) as per Article 27 of the DTAA between India and Singapore. In light of this development and the assessee's request for withdrawal, the Tribunal decided to dismiss all three appeals as withdrawn. The operative direction was to dismiss the appeals. No issues were expressly left undecided.

The Tribunal noted the assessee's submission that the transfer pricing issues had been discussed and concluded with the Inland Revenue Authority of Singapore under the Mutual Agreement Procedure (MAP) as per Article 27 of the DTAA between India and Singapore. In light of this development and the assessee's request for withdrawal, the Tribunal decided to dismiss all three appeals as withdrawn. The operative direction was to dismiss the appeals. No issues were expressly left undecided.

The Tribunal allowed the assessee's appeal. The Tribunal noted that the Delhi High Court in *Kusum Healthcare Pvt. Ltd.* held that the inclusion of 'receivables' in the Explanation to Section 92B does not automatically characterize every item of receivables as an international transaction. The High Court emphasized the need for a case-to-case investigation into delays, the impact on working capital, and analysis of statistics to discern a pattern indicating an international transaction intended to benefit the AE. The Tribunal found that the TPO in the present case had not conducted such basic exercise or analysis, nor examined statistics or patterns. The TPO's own findings that receivable days from AEs were 117 and from Non-AEs were 152, compared to the average of 77 days, favored the assessee. Furthermore, the Tribunal considered the assessee being a debt-free company, stating that delayed receivables would not impact profitability as the company largely uses its own funds and has no debt on which interest is paid. Following the decisions in *Integra Software Services P Ltd.* and *PCIT vs. Inductis India Pvt. Ltd.*, the Tribunal directed the AO/TPO to delete the upward adjustment and recompute the income. No issue was expressly left undecided.

The Tribunal held that the filing of Form 67 is directory, not mandatory, as Rule 128(9) does not prescribe disallowance for delayed filing, and neither does Section 90 or 91 of the Act. The assessee is eligible for Foreign Tax Credit as Form 67 was filed before the assessment completion.

The Tribunal noted that the assessee made a disallowance of ₹.12,00,000/- based on management estimate, which was not justified due to lack of a scientific method or basis. The CIT(A) had restricted the disallowance to this amount. The Tribunal found this to be incorrect, as the disallowance should be calculated based on investments yielding exempt income, not the total investment.

The Tribunal condoned the delay of 302 days in filing the current appeal, noting the assessee's bonafide reasons. However, the Tribunal observed a consistent pattern of non-response from the assessee to notices issued by the Assessing Officer and the CIT(A)/NFAC, indicating negligence. Despite this, considering the ex-parte assessment and dismissal of the appeal by the lower authorities, the Tribunal decided to remand the matter.

The Tribunal held that if a revisionary order passed u/s 263 is quashed, any consequential assessment order passed by the AO would be void ab initio and cannot stand judicial scrutiny. The Ld. CIT(A)'s decision to annul the assessment order was found to be based on a correct understanding of facts.

The Tribunal condoned the delay and admitted the appeal. The adjournment application was rejected, and the matter was remanded to the Assessing Officer for fresh consideration. The assessee was granted liberty to file evidence in support of their claim.

The Tribunal condoned the delay, finding sufficient force in the assessee's arguments and upholding the right to a hearing. The core issue revolved around the denial of deduction under Section 80P and the treatment of interest income from a cooperative bank.

The Tribunal noted that a Coordinate Bench had previously held that the assumption of jurisdiction under Section 153C of the Act was bad in law and quashed the assessment order. Therefore, the grounds raised by the Revenue in the present appeal were dismissed as infructuous.

The CIT(A) confirmed the addition, holding that the assessee's failure to file a return and respond to notices, despite making significant cash deposits, made it liable for the addition as unexplained income. The Tribunal noted the assessee's plea of non-deliberate non-participation.

The Tribunal noted that the assessee did not comply with the AO's requests, leading to profit estimation. While the AO estimated at 1% and CIT(A) at 0.75%, the Tribunal reduced the profit estimation to 0.50% of the total turnover, considering the nature of the business and setting aside the orders of the AO and CIT(A) to recompute profits.

The Tribunal set aside the orders of the AO and CIT(A) regarding the addition of Rs.3,26,000/-. The matter was restored to the AO for de novo examination in light of new evidence presented by the assessee.

The Tribunal dismissed the assessee's grounds challenging the denial of deduction under Section 80-IAB. It held that the assessee had violated Rule 11 of the Special Economic Zones Rules, 2006. The Tribunal found that the assessee's actions, including the perpetual lease granted to outsiders and the transfer of residential units, were in contravention of the SEZ laws. The Tribunal distinguished the case of DCIT Vs DLF Commercial Developers Ltd. relied upon by the assessee, stating that the facts and issues adjudicated in that case were entirely different and not relevant to the present appeal. The Tribunal explicitly stated that it was not returning any finding on the retrospective operation of Rule 11A, as it had already concluded that the assessee was in violation of Rule 11. Consequently, the appeals for AYs 2012-13, 2013-14, and 2014-15 were dismissed. Other grounds concerning the admissibility of other species of income for deduction u/s 80-IAB were rendered academic.

The Tribunal noted that the issue involved an erroneous grouping of amounts by the assessee, which was clarified by the assessee and accepted by the CIT(A) after examining the ITR and Tax Audit Report. The Tribunal found that the CIT(A)'s order was well-reasoned and based on proper appreciation of facts and law.

The Tribunal deleted the disallowance of Rs. 2,00,000/- under Section 40(a)(ia) following a Delhi High Court judgment. The 20% disallowance on travelling, music party, service, and production expenses (Rs. 4,01,682/-) was also deleted as arbitrary. Two issues regarding sub-contract payments (Rs. 7,00,000/- and Rs. 5,00,000/-) and a disallowance under Section 40(a)(ia) (Rs. 4,05,500/-) were remanded to the Assessing Officer for verification.

The Tribunal held that the assessee's claim for deduction under Section 80-IAB was not allowable. The reasoning was based on the AO's findings that the assessee had violated the provisions of the Special Economic Zones Act, 2005 and the Special Economic Zones Rules, 2006. Specifically, the AO noted that the assessee had treated leasehold land as stock-in-trade, which implied an acquisition of land, contrary to the prohibition on selling land within an SEZ. Furthermore, the transfer of residential units to outsiders was also considered a violation of the SEZ Act and Rules. The Tribunal agreed with the AO's conclusion that these actions made the assessee ineligible for the deduction under Section 80-IAB. The appeals were dismissed.

The Tribunal held that the assessee violated SEZ laws by leasing residential units to outsiders and treating perpetual lease payments as land cost. Consequently, the assessee was ineligible for the deduction under Section 80-IAB.

The Tribunal condoned the delay in filing the appeal. It estimated the agricultural income at Rs. 40,00,000/-, restricting the disallowance to Rs. 17,96,400/-, considering the land holding and historical income.

The Tribunal held that the PCIT erred in assuming jurisdiction under Section 263. The issue of whether the entire reserve was created before the relevant period and eligible for deduction was a matter of fact that the Assessing Officer had already considered.

The Tribunal found the CIT(A)'s order to be cryptic and lacking in proper analysis of facts. Both parties agreed that the matter should be restored to the AO for de novo examination and adjudication.

The Tribunal upheld the deletion of the protective addition. It found that the assessee was not the owner of the property and therefore could not be treated as the transferor for capital gains purposes.

The Tribunal held that as long as the land is classified as agricultural land and sold as such, the purpose for which the purchaser uses it is immaterial. The assessee's agricultural use was established by Adangal and revenue records. The AO had disregarded the claim on mere suspicion.

The Tribunal held that while the assessee might have had a bonafide impression that the report was uploaded, the delay in filing Form 10B was the reason for denial of exemption. However, referencing previous judgments, the Tribunal directed the AO to verify the Form 10B and allow the exemption.

The Tribunal noted that Rs. 31,06,000 of the property investment was accepted by the AO. However, the remaining Rs. 2,38,000 was treated as unexplained. The bank credits totaling Rs. 31,25,000 were explained as received from Mrs. N. Sasikala. The CIT(A) deleted these additions, finding that the assessee had discharged its onus of proving the source.

The Tribunal found that the revisionary order under section 263 was bad in law. It noted that the assessee trust has been enjoying exemption since 1954 and had numerous favorable orders from the Tribunal. The Tribunal acknowledged the challenges faced by the assessee in filing returns due to system changes and lack of registration numbers, which led to physical filing.

The Tribunal noted that the reassessment was based on issues already examined and accepted in the original assessment. The reopening was done after four years without any failure on the assessee's part to disclose material facts, making it a case of change of opinion.

The Tribunal accepted the explanation for Rs. 7,23,500/- as personal savings and deleted the addition to that extent. The balance addition of Rs. 19,80,000/- was confirmed as the assessee failed to provide evidence.

The Tribunal held that the PCIT erred in invoking Section 263 without establishing that the Assessing Officer's order was both erroneous and prejudicial to the revenue. The PCIT's order was set aside.

The Tribunal held that the Assessing Officer had no new material to reopen the assessment, as the issues were already examined during the original assessment. Relying on previous decisions, the Tribunal found the reopening to be based on a 'change of opinion' and thus invalid.

The Tribunal held that the cash deposit of Rs. 4,00,000, claimed as accumulated business receipts declared under Section 44AD, cannot be termed unexplained and directed its deletion. The issue of Rs. 9,85,000, claimed as sale consideration for a vehicle from partners, was remitted back to the AO for verification.

The Tribunal restored the appeal to the file of the CIT(A) to await the outcome of the condonation application and re-adjudicate the appeal accordingly. The appeal was allowed for statistical purposes.

The Tribunal held that the Singapore entity was a conduit for transferring funds, and the Indian entity was not engaged in substantial business. The funds withdrawn and parked as fixed deposits by the assessee were considered to be income in nature, not loans, especially given the absence of repayment and a police complaint filed by the defrauded Singapore party. The assessment under section 153A was also deemed valid as the assessee was a non-filer.

The Tribunal noted that the AO's order regarding outstanding current liabilities was cryptic. For the share application money, the Tribunal observed that the assessee requested admission of additional evidence and directed the AO to re-adjudicate the issue after considering the evidence.

As the appellant did not appear before the tribunal, the appeals were dismissed. The tribunal proceeded with the case based on the submissions of the respondent.

The Tribunal held that Section 69 is applicable only for unexplained investments, not for unexplained credit entries in the bank account. The AO's addition under Section 69 was therefore incorrect.

The Tribunal held that for persons other than those searched, the limitation period for assessment under Section 153C must be reckoned from the date of receipt of seized documents by the jurisdictional Assessing Officer. Consequently, the assessments for AY 2009-10 and 2011-12 were found to be time-barred.

The Tribunal found that the AO did not provide the assessee with a proper opportunity to explain the alleged shortage of cash before making the addition. Therefore, the addition made by the AO and confirmed by the CIT(A) was set aside.

The Tribunal found that the cash book was likely prepared to suit the assessee's needs, but also acknowledged the possibility of savings from earlier income. Therefore, the addition of Rs. 10 Lacs was restricted to Rs. 3 Lacs, and the remaining addition was deleted. The addition for house property income was not disturbed.

The CIT(A) deleted the addition, holding that the cash sales were satisfactorily explained by the assessee given the unique circumstances of demonetization and the demand for gold. The Tribunal upheld this deletion, finding the sales reflected in the books and offered to tax.

The Tribunal held that the transaction involving the transfer of shares was not a genuine sale of shares by the individual but a mechanism to facilitate the sale of immovable properties by the assessee's company. The assessee acted in a fiduciary capacity for his company, and the gains should be assessed in the hands of the transferor-company, not the individual.

The Tribunal held that if land is classified as agricultural land as per revenue records, the claim for exemption cannot be denied, and the purpose of the purchaser is immaterial. The Tribunal also found that the additions for loans were unsustainable due to incorrect invocation of legal provisions.

The Assessing Officer (AO) treated a credit of Rs. 5 Lacs in the assessee's bank account as an unexplained investment under Section 69, as the assessee failed to provide proof or details of the loan. The CIT(A) confirmed this addition. The assessee's AR argued that the addition under Section 69 was incorrect as it applied to investments, not advances or loans, while the CIT-DR contended that quoting the wrong section does not invalidate the addition.

The Tribunal held that since the AO relied on the statement of Shri Anand Kumar Sharma, it was mandatory to grant the assessee an opportunity to cross-examine him to effectively rebut the findings. The Tribunal also directed an opportunity to cross-examine Shri Brajnandan Singh.

The Tribunal held that for persons other than those searched, the limitation period for assessment under Section 153C must be reckoned from the date of receipt of seized documents by the jurisdictional Assessing Officer. Consequently, the assessments for AY 2009-10 and 2011-12 were found to be time-barred.